Natural catastrophes in focus: Heatwaves and droughts

Heatwaves and droughts are often connected, as extended periods of elevated temperatures with little precipitation can lead to drought conditions. Even so, droughts can occur due to long periods without precipitation, even without an accompanying heatwave.

As our climate changes, the frequency and intensity of heatwaves and droughts have increased in recent years. These weather events are expected to intensify further under scenarios of unmitigated climate change in which nations fail to sufficiently reduce greenhouse gas emissions. Since 2015, scientists have measured many of the hottest years ever recorded. Such extreme conditions can cause or worsen food and water scarcity that threaten some communities, contributing to macrotrends including increased resource-linked displacement and migration.

Drought has historically been a leading threat to farmers around the world, and a changing climate has exacerbated this risk. Economic losses from just a few severe drought events globally in 2022 were USD 26.6bn (adjusted to 2023 prices), with insured losses from these events totaling USD 2.6bn, or just a tenth of the economic losses. This reflects a vast protection gap.

Heatwaves and droughts can also present challenges to infrastructure and electrical grids. Extreme temperatures put additional stress on the power grid and water systems, causing service interruptions, and potential failure of key transportation and healthcare infrastructure.

Extended heatwaves can contribute to increased human mortality and morbidity, especially among older populations and clinically vulnerable individuals, resulting in increased medical care and potential excess mortality as more people die than would have been expected under conditions closer to historical norms.

The scientific consensus is that the most important action to reduce heatwave and drought occurrence and severity is to reduce human-caused CO₂ emissions that contribute to climate change, including by reducing carbon-based fuel consumption and investing in renewable energy sources. Individuals and corporations can support this energy transition by focusing their infrastructure investments.

While reducing carbon emissions remains a long-term objective, adaptation to a changing climate will also be critical, including to avert the most damaging consequences of droughts and heatwaves. As droughts grow more frequent, remedies include efforts to conserve water used for commercial, agriculture and personal purposes; upgrading and installing infrastructure, so it is better suited to withstand heatwave conditions; creating cooler environments with more shade trees, including in urban areas; and by resorting to drought-resistant crops to reduce water consumption and increase yields.

A number of proactive measures may help address adverse health conditions linked to excess heat and drought, in particular for those people living with health conditions that make them more vulnerable. Adequate hydration and investment in air cooling and dehumidification technologies that rely on renewable energy sources may contribute to risk mitigation and adaptation, as well as the adoption of policies or practices that help workers avoid unnecessary heat exposure and overexertion.

Heatwaves and droughts are believed to have contributed to increased total economic and insured losses in recent years, especially in agriculture lines of business. Some insurers have limited writing such protection due to excessive losses.

On life & health lines of business, extreme heatwaves have resulted in limited instances of excess mortality, though such events so far are not considered to have had a material impact on life insurers. Typically, more affluent groups are expected to have access to mitigation measures and greater ability to adapt to extreme events such as heatwaves, with resources to reduce exposure to the element sand lower their overall risk.

Health or other insurance impacts from climate change are complex and may also depend on access to mitigation and adaptation resources, as well as the intensity of a heatwave event. The longer-term health impacts--such as cardiovascular disease, respiratory illness and mental health-- from droughts and heatwaves require further study to understand their insurance implications.

Property losses linked to droughts and heatwaves are difficult to measure, in part because it is often difficult to discern between failures that occur due to extreme conditions and those that occur during the normal course of use. However, heatwaves can create additional stress on infrastructure or equipment that can contribute to breakdowns, adding to potential insurance claims.

In addition, droughts and heatwaves can cause ideal conditions for wildfires to ignite and spread quickly. These conditions can make it more difficult for firefighters to contain wildfires before they reach populated areas.